By TRAVIS MINNEAR, Commercial Review

Jay County Council unanimously approved an increase to the county's adjusted gross income tax Wednesday to provide property tax relief for residents.

The hike, which was the subject of debate during a one-hour public hearing prior to the group's meeting, moves the income tax rate from 1.5 percent to 2.6143 percent beginning Oct. 1. On Oct. 1, 2008, the rate will decrease to 2.45 percent.

Council members, without an absent Fred Bailey, refrained from implementing an increase to 3.15 percent, which is the maximum amount allowed by state law. The council said it wanted to avoid maximizing the income tax hike, a portion of which cannot be decreased by local officials, until it had time to see how the changes worked.

The ordinance is designed to combat homestead tax credit revenue losses in the future, which will be declining as Indiana attempts to balance its budget.

Council president Marilyn Coleman said 2008 represents the first year since the tax's inception that there will be no increase in homestead credit benefits.

The potential of lost revenue coupled with a rapidly approaching deadline for implementation of Aug. 1, meant the council had to move quickly, Councilman Gerald Kirby said.

If the council took no action, property owners would have to wait until 2009 for local relief.

"The consequences of inaction are far more dire than the consequences of action," Kirby said.

"We'd be in a position where we'd have to eliminate services," if the council didn't pass the income tax increase, he added.

Gov. Mitch Daniels on Wednesday, however, extended the deadline for counties to raise local income tax rates to Oct. 1. (For more on the governor's decision, see story on page five).

The tax expansion, estimated to generate $2,987,799 in 2008 and $2,509,996 for 2009, affects three areas of Jay County's income tax structure.

Auditor Fred Corwin said one-half percent of the increase, which will generate an estimated $1.4 million, will go directly toward a property tax relief fund for owners of qualifying resident properties.

A second component of the deal creates a .1643-percentage point tax increase to be used as operating funds for the county, its townships, cities, towns and libraries, Corwin said. It will raise approximately $477,803 in 2008, but will increase in 2009 to .4 percent.

Money for a stabilization fund also will be established through a .4 percentage point rise in income tax rates. It is slated to raise an estimated $975,196, and is intended to lighten the burden of poor economic performance in the future, Corwin said. That rate will be eliminated beginning Oct. 1, 2008.

"It's a fund we keep back in case we have a really bad year for unemployment and don't generate enough income tax," she said.

The final portion of the increase establishes a .05-percentage point expansion for a public safety fund. It will bring in $134,000 for the county and provide money for personnel, pensions and other services. Corwin said it is unclear whether the county can use the money for construction projects.

"That's going to have to be a very specific question asked to our legislators," she said.

Portland Mayor Bruce Hosier, who attended the meeting and public hearing beforehand, said he sees the public safety fund as an "insurance policy" for future safety needs.

He said increasing taxes is never an easy decision, but agreed it was the right call to help offset the future decrease in state funding.

"Sometimes the right decision is not always the popular one," he said.

The council noted that school systems are not affected by this ordinance, because they do not receive county adjusted gross income tax revenue.
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